In 1971, seeking to justify the scrapping of the gold standard and flooding the market with dollars, a Republican president, Richard Nixon, declared, “We are all Keynesians now.” He was referring to the British economist, John Maynard Keynes, who in the 1930s had called the gold standard a “barbarous relic” that got in the way of the taxing and spending needed to overcome the Great Depression.

Alas for Nixon, his Keynesian economic policies were no more successful in the 1970s than they had been in the 1930s. Indeed, partly because of Nixon’s misguided effort to control inflation through wage and price controls rather than control of the money supply, the American economy fell into a deep funk. It emerged only in the 1980s after Ronald Reagan reversed the Nixon formula with tax cuts and a return to a strong dollar.

With only slight interruptions, that has remained American policy ever since. President Bush, for example, responded to the bursting of the economic bubble of the late 1990s in quite a different fashion than Nixon responded to the collapse of the 1960s boom. He cut tax rates and supported Federal Reserve Board Chairman Alan Greenspan’s efforts to keep prices on an even keel. And he has – so far – resisted the temptation to clamp price controls on oil.

As a result, the economy has responded with two years of uninterrupted, low-inflation growth, despite the phenomenal spike in oil prices. One might say that we are all Adam Smithians now, referring to another British economist, Adam Smith, whose 1776 classic, “The Wealth of Nations,” makes the principled case for the market system.

Indeed, last February, no less than Alan Greenspan, perhaps the key economic actor on the world scene today, paid a remarkable homage to Adam Smith in a lecture in Kirkaldy, Scotland, birthplace of Smith in 1723. “Emperors and armies come and go,” Greenspan noted, “but unless they leave new ideas in their wake, they are of passing historic consequence. The short list of intellectuals who have materially advanced the betterment of civilization unquestionably includes Adam Smith.”

Smith, in contrast to the mercantilists of his day, argued that the “invisible hand” of self-interest, if allowed to work, would promote the public good by leading individuals to invent new products and processes, employ more people and steadily grow more productive. “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest,” Smith famously asserted.

As Greenspan noted, “Smith’s ideas … within a very few decades verged on conventional wisdom,” helping sweep away the remaining impediments to the industrial revolution and opening the way for an amazing 20-fold increase in England’s national output since 1820, not to mention America’s emergence as an economic colossus.

Nonetheless, intellectuals, politicians, and much of the media forgot about Smith. They rushed to embrace Keynesian theory, whose near-mystical complexities led them to believe that government could stimulate the economy to even higher performance. Alas, most of their imagined improvements turned out to have counterproductive long-term effects, even in such popular programs as Social Security and Medicare.

As a result, old Adam Smith is getting a fresh hearing, as the Greenspan lecture suggests. There will always be those – including many Republicans who favor trade barriers, huge government subsidies for “alternative energy” schemes, or Michigan’s long string of economic development boondoggles – who argue that markets are inclined to failure. Bush himself recently embarked on a worrisome campaign to force China to revalue its currency – in essence, a devaluation of the dollar.

But let’s hope that when it comes time to appoint a new Fed chairman next year, Bush picks somebody who shares Greenspan’s respect for Adam Smith. Markets do fail from time to time, but they are generally self-correcting. Government fails at least as often and is much harder to correct.

Mr. Bray is a Detroit News columnist.